Southeast Asia’s B2B

Digitization Leap:
Seizing Opportunities
in a Growing Region

B2B Enterprise Sector Analysis 2024 | Favour Capital

 Foreword
We are optimistic about the future of the B2B business model
in Southeast Asia (SEA), particularly in uncovering new
opportunities. Our proven track record validated by the
success with clients such as Inteluck and Buymed reinforces
our confidence in the resilience and potential of B2B models.
We believe that challenging economic conditions often drive
innovation and efficiency, driving businesses to adopt robust
and scalable solutions.

We specialize in growth-stage capital-raising services, steering

companies to navigate the complexities of securing funding
that aligns the interests of both businesses and investors. Our
approach fosters a win-win situation, where companies receive
the necessary capital to scale and innovate, while investors
find promising opportunities with reasonable valuations and
for long-term growth potential.

This report offers valuable insights for entrepreneurs

navigating growth-stage fundraising in SEA. We remain firmly
committed to supporting the B2B ecosystem and nurturing the
next generation of B2B leaders in the region, driving impactful
contributions to the market.

Eric Fang
Founding Partner
Favour Capital

Favour Capital | Southeast Asia’s B2B Digitization Leap

Table of Content

1 Navigating Southeast Asia's B2B growth:

Global and local firms adapting to the changing landscape

3 Our learnings on
B2B enterprise service opportunities in Southeast Asia

5 Optimizing growth-stage fundraising in Southeast Asia

Disclaimer
The information in this report is provided on an “as is” basis. This
report is produced by Favour Capital Pte. Ltd. (“Favour Capital” or
“FC”). It has been prepared solely for information purposes over a
limited period of time to provide a perspective on the market. It is
not intended for investment purposes. Projected market and
financial information, analyses, and conclusions contained herein
should not be construed as definitive forecasts or guarantees of
future performance or results. Favour Capital makes no
representation or warranty, either expressed or implied, as to the
accuracy or completeness of the information in the report and
shall not be liable for any loss arising from the use hereof.

B2B Enterprise Sector Analysis 2024 Favour Capital | Southeast Asia’s B2B Digitization Leap
 Navigating Southeast Asia's B2B Growth:
Global and Local Firms Adapting
to the Changing Landscape
Amidst significant global economic changes, Southeast Asia emerges as a beacon of potential, with
enterprise services undergoing a dynamic digital transformation. This shift is driven by market
imperatives and cutting-edge technologies, creating fertile ground for innovation and growth. From
2014 to H1 2024, there has been a notable increase in B2B funding, as these enterprises, with their
predictable revenue streams, have become increasingly attractive to investors in the current market
environment.

Exhibit 1.
Share (%) of Number of Deals by Business Focus, 2014 – H1 2024

B2B B2C
100

80

60
59% 61%
55% 56% 55% 55%
52% 53% 52% 51%
40 48%

20

0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024*

*Numbers reflect up to June 2024

Global tech companies are strategically investing in Southeast Asia to

augment technological capabilities, thereby enhancing the region's
appeal for global businesses and entrepreneurs seeking expansion or
diversification.

The region’s burgeoning digital penetration offers ample opportunities for innovative software
providers, as organizations across the Asia-Pacific increasingly embrace digital agility. The adoption
of SaaS, AI, and machine learning technologies have surged, reflecting a growing prioritization of
digital initiatives. According to the International Data Corporation (IDC), Southeast Asia's spending
on AI systems is projected to reach US$6 billion by 2024, underscoring the region's strategic
importance for global tech giants.

This trend is reinforced by substantial investments in local players, cloud systems, and AI
infrastructure from leading tech enterprises like SAP, Microsoft, and Amazon. For instance,
Microsoft has launched Azure regions in Indonesia and Malaysia, and Amazon Web Services (AWS) is
enhancing its cloud infrastructure in Singapore. Furthermore, Bain & Company projects Southeast
Asia's digital economy could reach US$300 billion by 2025, fueled by these advancements.

Source: Worldometers, Historia, Hero Supermarket, Indomaret, Dealroom.co, IDC, Bain & Company Favour Capital | Southeast Asia’s B2B Digitization Leap 1
These new technologies are being implemented across sectors such as logistics, healthcare, fintech,
manufacturing, and education, driving efficiency and enhancing core business offerings. This
ongoing digital transformation in Southeast Asia offers plentiful opportunities for enterprise
services, suggesting a promising landscape for both local and international players seeking to
optimize business efficiencies through innovative solutions.

Nonetheless, with these opportunities comes intensified competition. The influx of global
companies into Southeast Asia brings more advanced technologies and disruptive models backed by
substantial resources. This heightened competition raises the bar for service quality and efficiency,
further accelerating innovation and growth in the region.

To get a good grasp of the evolving landscape, it is essential to evaluate both the advantages and
challenges faced by local and global enterprises in SEA:

Exhibit 2.
Advantages and Challenges faced by both Local and Global Enterprises in SEA

Global Firm Local Firm

1. Advanced Technologies: Possess more 1. Deep Local Insights: Intimate knowledge

advanced solutions that has yet to be of customer preferences and strong
adopted by local players; understanding of local market trends;
Advantages

2. Superior Infrastructure: Robust systems 2. Agile Operations: Swift adaptation to

boost operational standards and market changes and strategic flexibility;
capabilities; 3. Community Connections: Strong
3. Substantial Resources: Extensive assets relationships with local stakeholders
enable significant market investments and enabling business partnership that drives
growth; innovation and resource sharing.
4. Disruptive Models: Innovative approaches
transform traditional business practices.

1. Cultural Differences: Difficulty in tailoring 1. Technological Disparity: Lag in R&D and

products to local consumer behaviors; access to cutting-edge technology;
Challenges

2. Regulatory Complexity: Navigating 2. Market Share Erosion: Global brands

diverse legal landscapes and compliance overshadow local businesses, reducing
requirements; market presence.
3. Partnership Building: Challenges in
establishing trust and negotiating with
local partners.

Source: FC Analysis Favour Capital | Southeast Asia’s B2B Digitization Leap 2

 Our Learnings on
B2B Enterprise Service Opportunities in SEA

Understanding the fundamental structure of Southeast Asia's diverse landscape is crucial, as the
region's varied languages, business climates, regulations, and market maturity present challenges
for both local and global players. The key to success lies in achieving product-market fit within each
country, given the differing market needs and maturity levels. For instance, complementary AI
solutions for B2B enterprise services have thrived in Singapore, where AI can be seen as heavily
used in advanced therapeutics development. This contrasts countries like Indonesia and Vietnam,
where AI is primarily applied to automating day-to-day work. Hence, targeting selected viable
markets, offering localized services, or leveraging proven business models would be the ideal
starting point to flourish in the heterogeneous SEA market.

Expanding Boundaries:
Global Companies Entering Southeast Asia
Learning from the past successful cases of global companies entering Southeast Asia, it is clear that
a deep understanding of local nuances is crucial. Companies that thrived consistently invested in
building a strong local team in each new cities they entered. This localized approach proved
invaluable for gaining insights into customer preferences, navigating operational challenges unique
to the region, and tailoring their products or services accordingly.

Timing also plays a significant role, particularly when forming strategic partnerships. While
some industries might experience a relatively smooth entry into Southeast Asia, those in highly
regulated sectors like Fintech often face more complex requirements. Regulatory compliance
delays can hinder market entry, making it essential to establish strategic partnerships early.
These partnerships can help companies shorten the time to market, allowing them a head start and
prevent competitors from gaining an advantage.

Winning in the Home Turf:

Growth Journey of Regional Players
We have seen global players do well in the Southeast Asian market. Nevertheless, regional players
can still compete and co-exist leveraging their strong understanding of the cultural setting and
forge strong local partnerships. Notably, the success of Southeast Asian companies in establishing
presence in the US, Europe, and broader APAC markets demonstrates that regional players have
the potential to stand toe-to-toe with global competitors and make a significant impact on the
global stage.

On the other hand, the constant influx of new players in the region poses challenges for companies
to differentiate themselves, accelerate growth, and become the winning player in the market.
Despite the increasing number of B2B enterprise service providers, successful regional
companies stand out by addressing industry pain points effectively. Understanding how a
company’s main offerings resolve these issues is crucial for identifying and capitalizing on
expansion opportunities.

Source: FC Analysis Favour Capital | Southeast Asia’s B2B Digitization Leap 3

 Zooming in Notable growth-stage companies like Buymed and Inteluck are making
significant strides. Headquartered in Singapore, both are driving the
on regional digitalization of traditional systems in healthcare and logistics,
players respectively, effectively addressing key industry pain points.

Case in Point 1: Founded in 2018 in Vietnam, Buymed has revolutionized the pharmaceutical
supply chain by digitalizing interactions between manufacturers, distributors, and clinics.
The previously fragmented Vietnamese pharmaceutical industry was full of independent players
and lacked a cohesive network. Digitalization became the fundamental answer for the pain point,
opening opportunities for the Buymed team to develop a B2B platform addressing the distribution,
transportation, and warehousing challenges. Not only relying on the technology but the extensive
partner network they have built within the pharmacies, clinics, and hospitals played a huge role in
its growth. After establishing dominance in Vietnam, Buymed later expanded to Thailand and
Cambodia with six offices across Southeast Asia and continuing its regional expansion.

Case in Point 2: Inteluck, a company offering digitalization for the logistics supply chain
services in SEA tackles a similar pain point. Founded in 2014 in the Philippines, Inteluck
recognized the need for technological disruption in addressing delivery inefficiencies within
the logistics industry. At a time when few players were focusing on digitalization and efficiency
improvements in traditional logistics, the company stepped up to offer innovative solutions that
enhanced operational efficiency and streamlined processes.

Specializing in contract logistics services and transport management systems (TMS). Inteluck has
established a robust presence in key regional markets, including the Philippines, Thailand, and
Vietnam. Unlike many of its peers, Inteluck primarily targets large enterprises like Coca-Cola, Nestle,
and Lucio Tan’s Asia Brewery rather than SMEs and retail businesses, allowing the company to have
a more stable and sustainable business. The client segment they mainly serve became another
catalyst factor for Inteluck’s organic regional expansion.

Bridging the technology gap is important, but leading in technological advancement does not
guarantee market dominance. The degree of necessary advancement may vary across
industries. While high-tech solutions like IoT automation are vital for efficiency in traditional sectors
like logistics and manufacturing, some Southeast Asian healthcare markets might benefit more from
fundamental digitalization efforts. For example, a streamlined pharmaceutical supply chain, as
demonstrated by Buymed, or an integrated digitalized hospital solution through a Hospital
Information System (HIS) could address key industry needs. Simpler tech solutions, such as
personalized AI chatbots and co-pilots, can also enhance efficiency in various sectors.

Proven solutions can be replicated in similar markets, highlighting the importance of clear
objectives for companies aiming for regional or global expansion. Prioritizing fundamental pain
points over cutting-edge technology is key to achieving successful market adoption.

Source: FC Analysis, Deal Street Asia, Headline, Buymed, Inteluck Favour Capital | Southeast Asia’s B2B Digitization Leap 4
 Optimizing Growth-Stage Fundraising
in Southeast Asia

We have successfully advised Buymed, a B2B pharmaceutical distribution company in Vietnam, on

securing a US$51.5 million Series B funding round, with UOB Venture Management (UOBVM) as the
lead investor along with new participation from the United States International Development
Finance Corporation (DFC). Following that, we facilitated Inteluck, a B2B technology-driven supply
chain provider, in raising US$34 million Series C round, led by Navegar, the first Philippines-focused
private equity firm. Drawing from our exclusive role in securing growth-stage fundraising for B2B
business models in Southeast Asia, we would like to share key insights and learnings from these
experiences.

4 Considerations to Pay Attention to When

Fundraising in the Growth Phase
1. Importance of Managing Cap Table Diversity
Finding the right investor who can support the company’s mission and bring significant value are
crucial in growth-to-later stage funding. The nature of company’s target market - Large Enterprises
or SMEs & Retail - will define which type of investors are suitable. For local founders with regional
expansion plans, onboarding strategic partners who can facilitate smooth entry into new markets is
important. For global founders with businesses in SEA, having a strong and influential local partner
proves beneficial for long-term success.

We are confident in our Southeast Asian-based investor network, as well as our connections with
regional and global investors with interest in the SEA markets. Our networks include venture capital,
private equity, corporate venture capital, large conglomerates, impact funds, fund of funds, and
family offices.

2. Reduce Friction with Good Material Preparation

Thorough material preparation can expedite the fundraising process and increase the success rate
of securing the investment. It is important for B2B businesses to identify which key data to present
in the data room, such as, customer concentration and retention rate. Additionally, preparing
answers to frequently asked questions (FAQ) can significantly reduce back-and-forth communication
between parties.

More importantly, understanding and presenting a clear growth narrative, supported by verifiable
key assumptions and other supporting data, are essential for advancing a deal successfully.

Favour Capital | Southeast Asia’s B2B Digitization Leap 5

3. Reasonable Valuation Expectation to Support Long Term
Growth
The fundraising plan is closely tied to the valuation plan and the use of proceeds. A reasonable
valuation is essential to determine the appropriate fundraising amount, and the rationale for the
use of proceeds should clearly demonstrate its connection to business growth.

Balancing the expectations of the founding team, existing shareholders, and new investors is crucial.
Valuation testing helps identify the most suitable plan that aligns with every party’s interests during
fundraising.

4. Professional Communication in Advancing Negotiations

Fundraising is fundamentally a people-to-people business, where trust and communication are
integral. A good advisor plays a crucial role in facilitating key negotiation, understanding key issues
and resolving conflicts from a neutral standpoint. This approach is instrumental in advancing deals
forward, especially when potential conflicts arise between parties.

Read more:
Favour Capital advises Buymed on US$51.5 million Series B round
Favour Capital advises Inteluck on US$34 million Series C round

Favour Capital | Southeast Asia’s B2B Digitization Leap 6

About the Authors
For questions on the report or further discussions,
please contact a member of Favour Capital’s team.

Fang Ye (Eric) Enrico Septian Wikarsa

Founding Partner Associate
fangye@favour-capital.com enrico@favour-capital.com

Prameswari Jovita Astuti Putri Gia Han Huynh (Elaine)

Analyst Analyst
jovita.p@favour-capital.com elaine.hn@favour-capital.com

Get In Touch
For general matters:
admin.sea@favour-capital.com

Interested in a career with us:

hr.sea@favour-capital.com

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Indonesia
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Jakarta, Indonesia,12190

Vietnam
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Ho Chi Minh City, Vietnam, 700000

China
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Shanghai, China, 200040

Favour Capital | Southeast Asia’s B2B Digitization Leap 7

About

Favour Capital is a boutique investment bank registered

and headquartered in Singapore focused on the new
economy and upgrading of traditional industries in
emerging Asian markets, including Southeast Asia and
China.

With professional teams in Singapore, Indonesia,

Vietnam, and China, we provide capital raising and M&A
financial advisory services, assisting our clients and
partners to expand regionally and globally.

For further information, please visit:

www.favour-capital.com

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